Anything but disruptive: blockchain, capital and a case of fourth industrial age enclosure – Part I

A critical turn is needed in discussions of blockchain — the tech that underpins the virtual currency bitcoin – especially with respect to it as a phenomenon of the so-called fourth industrial age.1 Many have been swept-up in (if not duped by) the swell of excitement around a technological architecture which appeared, at first sight, to puncture the power and hegemony of global financial capital. By “at first sight” I am of course referring to Satoshi Nakamoto’s infamous white paper which gave birth to Bitcoin and exposed blockchain – a distributed ledger and means of immutably timestamping digital and digitized information – to consciousness beyond that of computer science.2

Published at the very point that the scale of the 2007/08 financial crisis was coming to light, it is the opening line of the abstract to Satoshi’s paper that demands attention: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution” (my emphasis).3 In this brief and arresting statement Satoshi points to two important but, I argue, now essentially debased characteristics of blockchain: decentralization and disruption. Moreover, captured in Satoshi’s words is a clear ideological intent to circumvent the authority of (centralized) global financial capital. But, against a backdrop of accelerating advances in blockchain technology, this ideological intent is now in palpable decline in the face of a resurgent post-crisis Fintech industry under the sway of the same corporations Satoshi was so keen to avoid.

So, should we still take seriously the possibility that blockchain might still evolve into something other than capitalism’s latest technological fetish? Perhaps not. Blockchain is, after all, arguably a product of the capitalist imagination, albeit a marginal and anarchic species of capitalism outside the mainstream. And yet, within the origin myth of blockchain captured by Satoshi is the clear sense that the technology does not exist exclusively for the advantage of capitalism.

Accordingly, what is at stake here is political and ideological. Blockchain is the opening of a new contestable horizon in the cyber-social field, which is largely informed by the proliferation of enclosed blockchains (private permissioned ledgers), interpreted here as the latest (re)enactment of an imposition of capitalist property definitions on common cyber-space.4 By definition enclosed blockchains reject the concept of a permission-less, open and public blockchain, and thus erode the potential for radical transparency through blockchain-as-commons. The answer is to resist to this trend by using the capabilities and promise of the technology itself to counter enclosure.

The following two-part discussion will explore the ideological evolution of blockchain, marked by this recent stage in its development: the proliferation of private permissioned ledgers. In part one I will discuss how decentralization and in particular disruption are wholly inappropriate terms to apply to the context of blockchain as we presently find it, as well as in terms of the direction in which blockchain is heading under the control and cognizance of multiple Fintech consortia. In part two attention will turn more specifically to the matter of enclosure.

The Fallacy of Disruption

Somewhat against my nature I will begin with a sporting example as a means of explaining why I believe that talk of disruption surrounding blockchain (as well as other technologies in the Fintech domain and beyond) is nonsense. The example is short and to the point (the explanation will be a little longer): in football when a player has the ball and is tackled by a member of the opposing team, this does not change the fundamental nature of the game. Rather, it is part and parcel of the game as such. No one, spectators and players alike, is under any illusion that that particular tackle, or any tackle before or after, disrupts the game. Quite the reverse in fact. In watching a game of football spectators expect to see tackles. Similarly, players (or their managers or coaches) expect to make tackles and, in reply, be tackled.

Now, some might argue that something approaching disruption occurs in the momentum of the team that loses possession. But a tackle nevertheless remains a transient event or moment within the norms and expectations of ninety minutes of football. Of course, it might reasonably be said to disrupt the game if the tackle breaches the norms of the game, for example if it is overly physical and breaks the leg of a player. Although, even in that instance the game fundamentally remains the same into the future, it is simply the case that the injured player is replaced by another, or in an extreme event the game simply stops (and may even be replayed at a later date). A tackle might be considered game changing therefore, but it is not disruptive.

If, in our game of football, a player should suddenly decide to pick the ball up and run with it, this is something quite different. It may still be a game, but it is not football. In the first instance we recognise yet another transient and momentary breach of the norms of football for which the player will likely be penalised. The effect however will be that the game will revert to type soon thereafter (possibly minus the offending player). But what if, in the aftermath of that game, a critical mass of spectators and players decide that they actually liked the fact that the player picked the ball up and ran with it? That it was actually more fun for spectators to watch, and more enjoyable or meaningful a game to play? On the one hand you get the story of William Web Ellis and an origin myth for the game of rugby. For present purposes, however, you get a useful metaphor for what disruption actually is: an entirely new game, realised and actualised as a new set of norms and expectations. This new game is not something that occurs within an existing set of norms, nor can it rightfully be called anything as clichéd as “game changing”. Why? Because game changing events can still occur within the boundaries of existing norms. Thus, to step outside or break free from a prescribed set of norms (to handle a ball meant only to touch the feet) is to be truly disruptive, not least because it radically alters expectations within certain social conditions.

Blockchain as we presently find it, and based on where it appears to be heading given all the signals at the time of writing, is a mere a tackle in the game of capitalism; it is capital playing with capital and all other social concerns are essentially excluded. Blockchain, in that sense, is not radical but just another technological fetish, a play-thing in the hands of capital. Arguably, Satoshi tried to invent rugby (although that is not entirely clear and certainly open to debate – with or without the sports metaphor). But what we are now seeing is a resurgent premier league of global financial institutions intent on ensuring that blockchain remains a part of their game, whether as a substitute bit player or a key striker.

Having, I feel, well and truly exhausted the football metaphor, hopefully the point is clear. Disruption, so-called and preached by many of the major global banks, to the extent that IBM are now claiming that more than half of those banks will be using the technology in the next three years, is anything but disruption because it leaves unchanged the conditions (norms and expectations) in which it occurs, namely those in which global financial capital has exclusive dominion over the social.5 That is, the very same conditions Satoshi claimed blockchain (and Bitcoin) would, indeed must, circumvent as a part of a radically new decentralized global financial framework. An idea which is now fast losing traction in any meaningful way, and will doubtless end up as nothing more than a feature of blockchains own origin myth in years to come.

I accept that in reading Satoshi’s outline for a peer-to-peer electronic cash system there is no express suggestion that the intention was a counter or foil to capitalism as such. Indeed, many high-libertarians who believe in the incontrovertible good of free market competition would likely argue that attenuating or even dismantling the modes of centralized clearing, transaction and exchange that we presently see manifest in the financial services sector would free society and allow it to move towards a purer form of capitalism. The pendulum, therefore, swings both ways.

Libertarian perspectives certainly seem a good fit for the blockchain envisaged by Satoshi. Therefore, as a site for the implementation of (crypto)-currency exchange, the avowedly transparent public blockchain created by Bitcoin is an example of ultra-capitalism, not anti-capitalism, and indeed that general tenor is plain to see in blockchain development trends. Blockchain in that regard is the stuff of high-libertarian and anarcho-capitalist fantasies, and a long way from being the source of or basis for any entirely new post-capitalist games along egalitarian lines. That does not mean that blockchain should be disregarded yet by thinking that seeks either to check or go beyond capitalism. For example, in part two of this essay I will discuss one domain impacting social and ecological relations, provenance, in which blockchain is being mobilized, albeit in something of a comprised form, as a record to check the exploits of capitalism.

Blockchain, like most innovations in the capitalist domain of Fintech, is therefore not disruptive if we understand that term to mean a radical break from the existing norms of a particular form of socio-economic organization. Indeed, far from being disruptive blockchain is, on these terms, actually ultra-normative, especially in financial terms. In many ways this ultra-normativity can also help explain why lawyers, especially from major global firms used to dealing with equally major global financial institutions, who are drawn into frothy exchanges about the revolutionary potential of blockchain tend, quickly, to fall back into exceedingly banal explanations of where blockchain fits into existing legal/economic paradigms.6 In other words, some (high-powered) lawyers are baited by entrepreneurs and those further up the capitalist food-chain to engage in the idea that blockchain is forging a wholly new socio-economic reality, when indications are that blockchain is merely the latest pillar being used to prop-up the same old financial institutions. Hence, conclusions, at least from the point of view of doctrinal law, tend to pour cold water on the revolutionary fervour largely because blockchain, in the eyes of the law at least, is little more than indicative of the old adage, “nothing new under the sun”. Law, in that sense, is well placed to cut through the rhetoric.

Yet, we cannot underestimate the significant commercial potential blockchain presents, and thus the forceful desire of Fintech in particular to enjoy its latest technological fetish and have law structure this desire. This leads lawyers to engage, all too often, with blockchain innovation as if they were judges of a beauty pageant, their lustful gaze fixed on a pure entrepreneurial spirit that parades before them and exposes itself in all its lascivious financialized glory.7 Thus, in the end, law fails to call-out the nonsense it sees behind the rhetoric, and settles for a profitable dialogue with the entrepreneurial spirit on classic litigation concerns and how best, like the generations of risk-aware capitalists before them, the average entrepreneur might avoid liability when things go wrong, and live to profit another day.

What of the concept of decentralization – another of the foundational blockchain characteristics outlined by Satoshi? Here we find a strange twist in proceedings, because the signs are that leagues of financial and technological institutions want to promote decentralization, even as that appears to undermine the authority and control over the movement and flow of global finance and information of which they have become accustomed in the last twenty years or so. And yet, like disruption decentralization as talked about by the likes of Thomas Jordan, the president and chairman of the board of Switzerland’s central bank, is really nothing of the sort because it is, to all intents and purposes, a small and elite centralized dictate which is determining the form and substance that decentralization will ultimately take.8

Whether directly, through large research and development consortia consisting of global financial and technology corporations who are forging and shaping the myriad paths of decentralization in their own image, or indirectly, via investment in entrepreneurs and start-ups keen to promote and develop blockchain along manifold “decentralized” lines, decentralization is only ever occurring within the boundaries of existing capitalist norms and expectations. That is, decentralization is accepted as a method for the creation of new markets and enforcing longstanding (conservative) modes of productions. Indeed, the role of “start-ups” in respect of blockchain (and perhaps more broadly as well), is little more than outsourced research and development on behalf of the global financial and technological elites concerned with mitigating their direct exposure to the risks of backing new and potentially lacklustre technologies.

Moreover, decentralization is a canard because the general blockchain trend is not towards continuing to support decentralization per se in the form of the public blockchain. Rather it is towards private or permissioned ledgers against which the concept of decentralization means nothing. In other words, far from circumventing the institutions of global finance, these permissioned ledgers are set to become the sine qua non of future banking, even if this means, as the Bitfury Group and Jeff Garzik claim, ending up with a “third way” of merged or meta-chains incorporating public and private entities that soften the effects of privatization.9

Beyond the public and transparent blockchain, and thus any hope of preserving a common space if not exactly or politically-speaking a “commons”, we see a potent indication of the victories of normative liberal and, to a greater extent, global financial capitalism over the blockchain narrative. An ideological victory which is in no small part manifesting itself through the proliferation of permissioned enclosed ledgers which are altering the dynamic of blockchain development in ways that need resisting. As will discussed in part two of this essay, as ideological events these enclosures re-enact the enclosures of the first industrial age, but are also notable in the fate of a far more recent commons, the world Wide Web. Could this rejection of the commons signal a final strangulation of the concept of blockchain as a radically disruptive technology, or as in any way other to the needs and desires of capitalism?10

The fourth industrial age is the latest stage in the ongoing global digital revolution, and refers to the proliferation of technologies that advance the commercial and social role of the internet and mobile technologies. Like land, steam and coal in the first industrial revolution, the fourth industrial age relies on specific resources and assets to help drive innovation. More importantly, like the first industrial age, the contemporary digital domain, and the resources and assets therein, is, first and foremost, a site of exploitation for the advantage of financial capital. For further definition see, for example: Schwab, K. 2016, The Fourth Industrial Revolution : what it means, how to respond (Online) Available at: https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/ (accessed 28 September 2016) ↩

Distributed ledgers, as well as proto-electronic currencies, were first theorised and tested in the 1980s and 1990s, but they failed to materialize due to different factors, including a lack of computational power and infrastructure. In short, the world was not ready for them in the same it was for Bitcoin. ↩

o be clear, a direct comparison between 18th century land enclosure and blockchain would be nonsense, or, at the very least, exceedingly hard to justify in the round. Accordingly, such a comparison is not the intention here. Rather, enclosure is evoked primarily because it is indicative of capitalism’s desire to impose private-property definitions on common (cyber)-space, which leads, amongst other things, to the promotion of non- or anti-relationality via withdrawal, exclusivity and privatization. ↩

I am also reminded of Jill Lepore’s article “The Disruption Machine”, in which she talks about “the rhetoric of disruption—a language of panic, fear, asymmetry, and disorder”. In other words, so much of what is considered disruptive is for and on show. See: Lepore, J. 2014. “The Disruption Machine”. The New Yorker, June 23. (Online) Available at: http://www.newyorker.com/magazine/2014/06/23/the-disruption-machine (accessed 30 September 2016) ↩

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6 comments for “Anything but disruptive: blockchain, capital and a case of fourth industrial age enclosure – Part I”

Marco van Heugten

18 October 2016 at 7:09 am

In Dutch there is a small historical literature about the mint masters in the Republic, with up to 14 official mints (provinces mostly and a few cities, all partly different) and at the same time the development of the General Masters of the Mint.

Of course in Europe after Roman military dominance withered numismatics became more popular everywhere. This http://www.schoklanddoordeeeuwenheen.nl/muntslag-Kuinre.htm is about an article from Grolle, the Lords of Kuinre and their money, 10-14th century, the Kuinder famous up into stories for their piracy and robbery (the castle (motte) of Heynric de Crane, robberlord, destroyed completely by an association of the Fries and Willem, count of Holland in 1196, rebuild in 1204, 1530 of the map for having no strategic purpose anymore) in former, poldered, Zuiderzee, of course owning their coin too (under the jurisdiction of an after the Battle of Ane practically bankrupt de Sticht, the episcopal principality of Utrecht..).
for the last time in 1431 in Emmeloord nearby (and overlapping) is written about an area of land called Munte (mint of Kuinre). Yep.

Hi Volodymyr. Many thanks. I know of some of Oliver Hart and Bengt R. Holmström’s work, although not in any great detail. Can you explain the connection you see between their work and the article here?

The blockchain is the surrogate of financial and legal institutions and the contract theory is the surrogate of the Law of contracts.
The Law is under pressure of the surrogates.
In broad sense the danger for the Law make up, at least, two factors. The first factor is the desire of economists to lower the Law to an ordinary tool of the economic. The second factor is the desire of lawyers to lower the Law to the routine legislation – transforming the laws in the instructions.